Buying a home is a milestone, whether you’re a first-timer or a seasoned home buyer. It can be a stressful process, but with ample preparation, you can expect a positive home buying experience. The following steps should help you prepare for your home purchase.
Strengthen your credit score
A good credit score is an important requirement in obtaining a loan. And as we all know, a loan finances your home purchase. Before you begin shopping for a home or even a mortgage, it’s imperative to improve or strengthen your credit score, depending on its current situation.
Aside from improving your chances of getting approved for a home loan, a good credit score can also mean lower monthly payments. Strive for a credit score of at least 700, which will be able to get you a good deal, according to BankRate.com.
So, how do you improve or strengthen your credit score? There are several ways. You can do the following to get your credit score in shape before you shop for a home:
- Pay your bills on time – Never miss a payment and you’ll be on the path towards a great credit score.
- Stay within your credit card limit – An even better option would be to maintain low balances and pay debts as soon as you’re able. Before you apply for a mortgage, pay off your cards.
- Get mistakes on your credit report fixed – Carefully examine your credit report for any discrepancies. Should you find one (or more), don’t hesitate to file a claim and get those inaccuracies fixed.
Choose a lender
A home is a long-term commitment, and so is a mortgage. Therefore it’s important to find a mortgage lender that best fits your needs and financial capacity.
Before you jump into the pool, it’s best to acquaint yourself with the different types of lenders in the market. The most common include credit unions, mortgage bankers, correspondent lenders, and mutual savings banks.
Survey the landscape to find a lender that fits your needs. Don’t hesitate to ask questions about their policies. Comparing rates from different lenders will also help you determine which lender to get. Having a good credit score is especially beneficial in finding the best mortgage lender.
Shop for a mortgage (and get pre-approved)
There are several types of mortgages available in the market. Each of these mortgages come with their own set of pros and cons. Meanwhile, some mortgages cater to a specific group of home buyers and owners, such as VA loans.
Fixed-rate and adjustable-rate mortgage loans
These loans are characterized by their respective interest rates. Fixed-rate loans have the same interest rate throughout the rest of the repayment term. Some buyers like this loan because of its stability, as the rate will never change for the entire term. Meanwhile, adjustable-rate loans have an interest rate that will change once in a while. It will start off as fixed for the first few years, and then eventually adjust.
Conventional and government-insured loans
The difference between government-insured and conventional home loans are simple. The former is backed by the government and includes FHA loans, VA loans, and USDA/RHS loans. Conventional loans, on the other hand, are not backed or insured by the federal government.
Jumbo and conforming loans
Loans can also be classified by their size. One distinction between jumbo and conforming loans is that the former exceeds the limits established by Fannie Mac and Freddie Mac, while the latter conforms to these guidelines. Since jumbo loans are large, buyers need excellent credit scores and need to pay larger down payments in order to get approved for one.
Would you like to learn more about home buying preparations? Contact us today at 863-294-7000 for more information.